Mainland property stocks have surged nearly 50 percent since the start of the year, far outperforming other sectors.
China’s housing market has regained its momentum since the Lunar New Year holiday; housing prices have surged more than 30 percent within a month.
However, the recent price surge of mainland property stocks reflects a revaluation rather than a brighter outlook.
The government may soon unveil some dramatic measures to cool off the red-hot housing market.
In fact, authorities have asked organizations like the China Index Academy of SouFun Holdings Ltd. to stop publishing housing price data.
The widely-watched 100-city housing price index has quietly ceased publication since November last year, as a result of which there is no more reliable source of updated housing prices in China that is available online.
Meanwhile, state-run media have reported that housing prices in first- and second-tier cities have stopped rising while those in lower-tier cities have stabilized.
In a related development, Weibo is said to be deleting any posts on the microblogging site about housing price rallies.
Despite these moves, which are aimed at cooling market expectations, home prices in major Chinese cities have staged a fresh rally after the Lunar New Year holiday.
Some cities even reported a surge of 30 percent one month after the holiday break, according to data from Huatai Securities (06886.HK).
The average housing price in downtown Beijing is above 150,000 yuan (US$21,700) per square meter, while 200,000 yuan psf is quite common.
Home prices in Beijing have soared 20 percent since the start of the year, according to a Weibo post by market commentator Cao Shanshi.
Prices outside the city’s sixth ring road has even come close to 50,000 yuan psf, he said in the post, which has since been deleted.
All these frenetic price rises have benefited leading property developers.
China Evergrande Group (03333.HK) said sales rose 88 percent to 68.4 billion yuan in the first two months of 2017 from a year earlier, while Country Garden Holdings Co. Ltd. (02007.HK) said revenue was up 270 percent at 87.3 billion yuan during the period.
The situation has put authorities in a bind, given that the nation’s GDP growth and local government revenue depend heavily on the housing sector.
However, overly inflated housing prices are likely to lead to financial and social turmoils, and hurt the credibility of policymakers.
As such, we should not underestimate Beijing’s determination to cool down property prices.
Some developers say price caps have already been implemented secretly in many “hot” cities, adding that they may not be able to obtain sales permits if the new home prices post rapid gains.
Also, the central government has reportedly ordered party chiefs in several cities to curb housing prices, or face the risk of being replaced.
Amid speculation that the government may introduce new curbs to rein in home prices, possibly in the middle of this year, many leading developers are stepping up their sales.
As such, surging house prices may not sustain for long, and share prices of property companies may likewise be affected.
This article appeared in the Hong Kong Economic Journal on March 14
Translation by Julie Zhu
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